Arthur Hayes: Bitcoin may surge as Chinese investors hedge against yuan drop

Trump’s trade war has wreaked havoc on crypto markets, Bitcoin included. However, Arthur Hayes believes they will bring a new catalyst that investors are overlooking.

Since peaking in January, Bitcoin (BTC) has lost more than half a trillion dollars in market cap, largely due to fears surrounding Donald Trump’s trade war. However, on Tuesday, April 8, BitMEX co-founder Arthur Hayes argued that these tariffs could have a hidden, positive effect on BTC.

Specifically, Hayes is looking at the effects that tariffs currently have on the Chinese yuan. On April 8, the currency hit 2023 lows compared to the US dollar, trading at 7.31 to one dollar. This drop was largely due to fears over the effects of US tariffs on the Chinese economy.

Hayes believes that a weakening yuan could drive Chinese investors to seek hedges against inflation, with Bitcoin as the most obvious option. He pointed to similar instances in 2013 and 2015, when devaluation fears around the yuan spurred renewed interest in Bitcoin.

How China affects Bitcoin’s price

China has historically been a significant market for Bitcoin, with many seeing the asset as a hedge against a depreciating yuan. In 2013, Bitcoin gained traction in China amid growing concerns over the People’s Bank of China easing monetary policy. At that time, the yuan traded at 6.12 per dollar, compared to 7.31 today.

In August 2015, the central bank devalued the yuan by over 3% in a single day to stimulate exports and economic growth. Bitcoin’s price responded, rising from $200 to $500 by November. These examples show how monetary policy shifts can have a direct impact on Bitcoin’s demand.

Still, Bitcoin is not the only hedge against inflation for Chinese investors. In fact, many are turning to gold, which has shown consistent price increases throughout the year. What is more, legal uncertainty and tight regulations may prevent many ordinary investors from buying Bitcoin.